WOW returns four planes in cash crunch

The Reykjavík-based carrier says that “a number of external and internal events have worsened significantly”.

The troubled Icelandic low-cost carrier WOW air has revealed it will reduce its fleet size and return four planes to their lessors as it restructures its operations.

The airline is downsizing its fleet by two Airbus A320s and two A330s “as a part of necessary restructuring of the airline and to ensure maximum utility of its remaining fleet,” it says in a statement.

The news comes a day after Icelandair revealed it may not be on time to fulfil all of the conditions to buy its low-cost rival by a deadline set for Friday.

The Reykjavík-based carrier explains that since a bond issue in September “a number of external and internal events have worsened significantly and the company is now working on securing its long term funding”.

Bad publicity about the financial health of the company has had a significant negative impact on sales and on its credit position, it said, warning that Q4 results will be worse than anticipated.

High pressure
On September 18, WOW air closed a bond sale of €60 million, yet two months later its financial situation has deteriorated significantly.

In a letter to the bondholders, owner and chief executive Skuli Mogensen points to pressure surrounding the company since the Primera Air bankruptcy.

Leasing providers, creditors and authorities have tightened the conditions, and in combination with rising oil prices for which WOW has not hedged its purchases the company is in a liquidity gap.

The airline’s liquidity challenges have been further compounded by the fact that a sale leaseback agreement has fallen through, which means that at least US$25 million is currently missing in the company’s accounts.

“This is not a situation that some of us imagined in September, and I personally invested €5.5 million in cash in the company as I was convinced that the funding would be sufficient to secure us a stock exchange listing of 18 months,” Mogensen laments.